Background and credit checks

Bankers, Lenders, and Mortgage Brokers 15 Replies

Hi All,

I have a company that writes mortgages for those flipping or rehabbing properties. As part of our due diligence, we run background and credit checks on the borrowers. Does anyone have any input or suggestions on how to do this. Currently we use a company that uses a third party verification so even though we get the paperwork signed by the borrower that gives us permission to run these checks, they still need to approve, and pay for, the check through the site. I'd like to avoid having to bother them to do so and take the cost in-house. Thanks for the help.

We actually use the tenant screen by trans union. I think it's lacking in some situations and appears to be some how difficult to navigate for my tenant class. I transfer the costs to the applicant but I believe it allows for the landlord/Pm to incur all costs and just sends them an email for ID verification. Relatively painless most of the time and their CS is pretty responsive.

@Arick W. - I've used that same service but had a few too many instances where the applicant never received the email. I did like the option of paying for the check instead of transferring the cost to the applicant. 

I've since tried experian which offers very similar results but is a bit more reliable. However, there is no option for me to pay for the check and forces the applicant to pony up.

Just out of curiosity, how come you'd like to take on that extra expense? I found for me, probably because of my tenant class, that everyone wants to apply when they don't have to pay for it. I guess I kind of use it as a weeding out mechanism.

@Arick W. - We charge a small application/processing fee and have incorporated the checks into it. We could, and do, discount our fee accordingly but I would prefer not to ask the applicant to put out any money until the deal closes and it's time to begin their monthly interest payments.

That makes sense. I appreciate the insight.

I highly recommend Experian at https://connect.experian.com/

I don't recommend TransUnion at all.

All you enter is potential tenants name and email and your reason (tenant credit check).

They receive an email and costs $ 14.95

I also have them fill out an application and call previous/current landlord.

If they want someone to cosign like a parent i require credit check on cosigner as well. Trust me cosigners can be worse. Also be careful with non married couples if one of them can't afford the rent on their own. You as a landlord put yourself in a position of needing the relationship to be maintained.

John

John, would you mind sharing some of your reasons for preferring Experian's service over TU's? 
Originally posted by @John Mahady :

I highly recommend Experian at https://connect.experian.com/

I don't recommend TransUnion at all.

Keith,

Briefly, ease of use. I get the information I need quickly. Doesn't come across overly intrusive by potential renter. 

TransUnion overcharges and from others feedback in reviews the information is incorrect.  

We pay $5 per credit check for a full credit report (nothing hidden/changed/etc). Can see month by month what was on time and what was late, all balances, etc - and we cover the cost. For tenant screening - we usually do this early on since the $5 is a quick way to just say "sorry, didn't pass credit check" and be done instead of spending tons of time processing through the rest.

@Joshua Kaufman ,

I'm wondering if a better question would be: How do you screen them (rehabbers / flippers) for their REI knowledge / competency / experience?

A W2 employee with sterling credit may be heading out into REI waters which, to him, are uncharted. So, no matter his credit history, he's still a terrible risk.

Originally posted by @John Mahady :

Keith,

Briefly, ease of use. I get the information I need quickly. Doesn't come across overly intrusive by potential renter. 

TransUnion overcharges and from others feedback in reviews the information is incorrect.  

If the information on a Trans Union credit report is inaccurate, those people should be referred to credit repair. By law (the FCRA), any inaccurate, unverifiable, incomplete or untimely entry on a credit report MUST be deleted.

@john. K What company do you use? 

@David Dachtera - you are correct that it could be a complete unknown. We will reduce our LTV and increase our collateral (including blanket mortgages on additional properties) until the borrower has proven their abilities and has a track record with us.

The credit report helps, but it's only one piece of the pie when determining who to lend to